A dollar alternative
In June, Pakistan used China’s currency to pay Russia for a 100,000-tonne discounted crude oil purchase. That was a first: Islamabad has never used yuan before to settle cross-border trade transactions with a third country, although it has invoiced part of its Chinese imports in Renminbi (RMB) for the last several years. The development signifies Pakistan’s increasing reliance on Beijing as it faces a crippling balance of payment crisis and is strapped for dollars to pay the bill for its surging international purchases, especially fuel. “Use of yuan to import Russian oil underscores an emergency situation for Pakistan, with its dollar reserves dwindling to cover less than a month of its imports,” noted a senior State Bank of Pakistan (SBP) official, speaking on condition of anonymity because he’s not authorised to give public statements. “But for China, it’s of strategic importance as Beijing pushes to boost global utilisation of RMB as a credible, stable alternative to the dollar.”